Can self-managed superannuation fund trustees earn the equity risk premium?

P J Phillips; M Baczynski; John Teale

doi:10.1108/10309610910975315

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Can self-managed superannuation fund trustees earn the equity risk premium?

Journal article

Open access

Peer reviewed

Can self-managed superannuation fund trustees earn the equity risk premium?

P J Phillips, M Baczynski and John Teale

Accounting Research Journal, Vol.22(1), pp.27-45

2009

DOI: https://doi.org/10.1108/10309610910975315

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Abstract

financial risk

pension funds

trustees

interest rates

Purpose - The purpose of this paper is to determine whether self-managed superannuation fund (SMSF) trustees earn: the equity risk premium or any premium to the riskless rate of interest. Design/methodology/approach - Using a sample of 100 SMSFs, the average annual returns since inception of the funds in the sample are compared with: the average annual equity risk premium since that time and the average yield of Commonwealth Government Securities since that time. Findings - The investigation reveals: the SMSFs in the sample do not earn the equity risk premium and the SMSFs in the sample did not earn a premium to riskless rate of interest. This leads to the conclusion that the SMSFs have borne risk without commensurate reward. Research limitations/implications - The trustees' rationale for making particular investment decisions and the consistency of the portfolio structures with the risk profiles of the trustees are two areas that may be fruitfully explored in future research. Practical implications - For SMSF trustees, a simple portfolio that divides assets between (unmanaged) index funds and risk-free securities on the basis of trustees' risk aversion may generate better results than the existing portfolios. For policy makers, the relatively poor performance of SMSFs implies that the superannuation system as currently structured may not be generating returns that will maximize retirement incomes. Originality/value - The paper provides the first comparison of SMSF returns with the equity risk premium and the riskless rate of interest measured at appropriate horizons

Details

Title: Can self-managed superannuation fund trustees earn the equity risk premium?
Authors: P J Phillips (Author) - University of Southern Queensland
M Baczynski (Author) - University of Southern Queensland
John Teale (Author) - University of the Sunshine Coast - Faculty of Business
Publication details: Accounting Research Journal, Vol.22(1), pp.27-45
Publisher: Emerald Group Publishing Ltd.
Date published: 2009
DOI: 10.1108/10309610910975315
ISSN: 1030-9616
Copyright note: Copyright © 2009 Emerald Group Publishing Limited. This article is © Emerald Group Publishing and permission has been granted for this version to appear here. Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited.
Organisation Unit: University of the Sunshine Coast, Queensland
Language: English
Record Identifier: 99449735402621
Output Type: Journal article

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Web Of Science research areas: Business, Finance

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